Aveanna Healthcare Holdings Inc. Q4 FY2025 earnings call

• Fourth quarter 2025 revenue $662 million, +27.4% y-o-y; adjusted EBITDA $85 million, +54% y-o-y. Full year 2025 revenue $2.433 billion, +20.2% y-o-y; adjusted EBITDA $320.8 million, +74.8% y-o-y. - Labor environment challenge addressed by aligning with preferred payers and government partners. - 2025 government affairs strategy for private duty services: advanced legislative agenda to improve reimbursement in at least 10 states and advocated for Medicaid rate integrity. - 2025 preferred payer initiatives: increased private duty services preferred payer agreements from 22 to 30. - 2025 home health goal: maintain episodic payer mix above 70% and return to normalized growth; Q4 episodic mix 78%, total episodic volume growth 25%. - Recently announced acquisition of Family First Home Care, expected to close in Q2 2026. - 2026 strategic initiatives: strengthen partnerships with government and preferred payers, improve clinical outcomes and customer engagement, implement AI and automation, grow through acquisitions, engage leaders and employees.

Private duty services: Q4 revenue ~$541 million, +28.1% y-o-y; ~12.4 million hours of care, +17.9% volume; revenue per hour $43.74, +10.2% y-o-y; gross margin $149.9 million, 27.7%; cost of revenue rate $31.62, +13% y-o-y; spread per hour $12.12. Home health and hospice: Q4 revenue ~$69.3 million, +27.3% y-o-y; 10,400 total admissions, 78% episodic; 14,000 total episodes of care, +25% y-o-y; Medicare revenue per episode $3,223, +3% y-o-y; gross margin 53.7%. Medical solutions: Q4 revenue $52.5 million, +21.3% y-o-y; ~92,000 unique patients served; revenue per UPS ~$570, +17.9% y-o-y; gross margin ~$26.2 million, 50%; Q4 benefited from reserve release, expected to normalize in Q1 with gross margins 43%-45% range

• 2026 revenue range $2.54 - $2.56 billion. - 2026 adjusted EBITDA range $318 - $322 million. - Guidance does not include impact of Family First acquisition. - Expect 2026 preferred payer agreements in private duty services to go from 30 to 38. - Expect home health episodic payer mix to remain above 75% with organic growth rates approaching double digits. - Expect medical solutions preferred payer agreements to grow, with margins normalizing. - Expect private duty services volume growth to return to mid single digits and then double digits by end of 2026.

• Evolving environment challenges. - Labor market challenges. - Regulatory approval risks related to acquisitions. - Impact of weather and respiratory season changes on operations. - Uncertainty in state contracting and reimbursement rate changes in certain geographies like California.

Q: Congratulations on the family-first acquisition. How should we think about the impact on leverage and accretion?

A: The transaction has very minimal impact on leverage profile initially, but with generated free cash flow in 2026, pro forma leverage will be slightly flat to slightly down. Jeff added it's a nice transaction that densifies services and is a good cultural and operational fit.

Q: Do you have pretty good geographic coverage across your footprint with preferred provider arrangements?

A: The eight added in 2025 and anticipated eight in 2026 are in current geographies post Thrive acquisition, still densifying, most major payers in major markets are landed, and next steps include filling in states like Ohio, West Virginia, etc.

Q: Any color on revenues and EBITDA contribution of Family First acquisition?

A: Revenue is in the ballpark of $120 million, impact on 2026 financials depends on closing timing; integration is expected to be smooth like Thrive acquisition.

Q: On preferred provider arrangements, current geographic coverage and nature of incremental agreements?

A: Incremental agreements are in current geographies, densifying, landed most major payers in major markets, next steps include filling in certain states.

Q: Focus on home health episodic mix and membership impacts?

A: Home health has great results with episodic mix approaching 80%, clinical outcomes are good, and no major concerns with managed Medicare trends.

Q: Medical solutions reserve impact and run rate?

A: Q4 benefited from reserve release, expected to normalize in Q1 with gross margins 43%-45%; modernization efforts expected to increase preferred payer numbers and return to double-digit growth in medical solutions.

Q: Quantify magnitude and timing of wage pass-through in 2026?

A: Will continue to actively manage spread, with private duty services gross margin expected to be in 27%-28% range as rate wins are pushed to caregivers.

Q: California state contracting and impact on PDS?

A: No material change expected in 2026 budget for California PDN rate increase, lobbying continues but not modeled in guidance.

Q: Impact of oil prices on caregivers and revenue/cost?

A: Vast majority of revenues have zero tie to gas prices; home health and hospice has about 12% of total revenue impacted, but not as meaningful as large peers.

Q: Replicate preferred payer strategy in home health?

A: Discipline around episodic payer mix, great clinical outcomes driving financial outcomes, payers have come around, payer team has done a great job.

Q: Revenue breakdown and rollout of preferred payer strategy in Family First acquisition?

A: Revenue base is two-thirds Florida, one-third elsewhere; integration takes time like Thrive, expected to close mid to late Q2 2026.

Q: Timeline and visibility of value-based arrangements in private duty?

A: Lag between signing preferred payer and value-based agreement is half a year to 18 months, expect 10 to 14-15 value-based agreements in 2026.

Q: Rate progression in new states and approach to entering new markets?

A: Look at factors like Medicaid population, PDM patients, etc. when entering new states, confident in working through government and payer relations to address rates.

Q: Volume growth opportunity for private duty in 2026?

A: Expect more normalized growth rate in 5%-7% range, EBITDA growing in high single digits after normalization, momentum continued into 2026 on normalized basis.

Q: AI and automation opportunities and impact on cost/margin?

A: Started in back office with RCM automation, now pivoting to front office for caregiver engagement, scheduling, etc., back office efficiency continued, front office piloting.

Q: EBIT growth by segment in 2026 and highest/lowest growth segments?

A: Medical solutions and home health and hospice historically highest organic growth; medical solutions in low single digits growth in H1 2026, returning to high single digits to double digits in H2; PDS returning to normalization in 3.5%-7% range; corporate costs at 4.5% of revenue and expected to improve; generating meaningful cash flow.

Q: PDS rate outlook with adding eight preferred payers and low rate expectations?

A: Shows maturity in preferred payers, smaller niche-oriented rate wins still matter, continuing to round out current markets and focus on new expansion.

Q: Synergy between home care, hospice, and personal care and consideration of selling hospices?

A: Nutrition and PDM businesses have synergies, PDS and HHH less so; committed to all three segments, growth rates are attractive, and focus on executing business plan